Footwear empire RCG Corporation has confirmed the demise of one of its best-known brands.
The company, owner of footwear retailers The Athlete's Foot and the Super Shoestore, has revealed that the latter has been placed into administration, following its “disappointing performance”.
According to 2013 fiscal half year results from RCG Corporation, Shoe Superstore struggled during the period, despite sales for the half-year of $4.80 million, an increase of 30.2 per cent on the previous year.
Like-for-like sales for the footwear retailer were also up 8.6 per cent.
However, RCG Corporation CEO Hilton Brett revealed that the improvement in sales was offset by lower gross profit margins and higher operating costs associated with the aggressive clearance of seasonal inventory.
In addition, the retailer delivered lower than expected results from several stores that were opened during the first half of last financial year, which had a negative impact on financial performance.
Overall, Shoe Superstore recorded an earnings before interest, taxes, depreciation, and amortisation (EBITDA) loss for the half-year of $0.68 million, a deterioration on the prior year’s loss of $0.21 million.
Brett added that despite a well-planned clearance period and a fresh advertising campaign, sales for Shoe Superstore have been disappointing since Christmas, with like-for-like sales for the six weeks to the middle of February down almost 10 per cent on the prior year.
“As we explained to RCG’s shareholders at our annual general meeting in November, Shoe Superstore has been subjected to full strategic review and repositioned to appeal to a younger consumer. However, with the alarming decline in high street shopping over the last 12 months we have been unable to attract a sufficient number of new customers to make this viable,” he said.
“We could not continue to support a loss making business that absorbs a significant amount of management time in the hope that over the long-term strip shopping conditions improve and that we secure additional brands.
"Both the financial and opportunity cost of doing so would not be in the best interests of shareholders and they have taken the correct decision stop supporting the business, leaving the board of Shoe Superstore with no alternative other than to place the business into voluntary administration."
Brett also acknowledged the impact the decision will have on Shoe Superstore’s employees and said that the company would do what it can to assist them.
Shoe Superstore was established in 2005 by entrepreneur Mark Teperson and acquired by RCG Corporation in 2009.
Excluding losses associated with the now discontinued Shoe Superstore business, RCG’s EBITDA rose 13.8 per cent from $5.96 million to $6.78 million.
The Athlete's Foot recorded total group sales of $92.42 million, an increase of 6.7 per cent on the same period in the prior year. Like-for-like sales rose 8.2 per cent from $82.26 million to $88.96 million.
RCG Brands, RCG’s wholesale and distribution division, recorded sales of $16.38 million for the half-year, an increase of 43.0 per cent on the previous year’s $11.45 million.
Wholesale sales grew 27.7 per cent to $13.89 million and retail sales through its own stores grew 335 per cent to $2.45 million EBITDA for the half-year was $2.42 million, an increase of 26.2 per cent on the previous year’s $1.92 million.
Commenting on the results, Brett said that despite the deterioration of the Shoe Superstore business, its other businesses – The Athlete's Foot and wholesale division RCG Brands – have exceeded expectations.
“We are extremely pleased with the performance of our ongoing businesses and could not have hoped for better results in the current climate. At the same time we are very disappointed that, despite every effort, Shoe Superstore continued to trade below expectations.”
“We are delighted with the performance of the The Athlete's Foot business which continues to grow and thrive despite the challenges that have faced some Australian footwear retailers over the recent past. We are also exceptionally pleased with the performance of RCG Brands in what can only be described as very difficult trading conditions,” he said.
“Although our decision with regard to Shoe Superstore was a difficult one to make, we are absolutely convinced that it is in the long term best interest of the RCG business to have done so. We are left with two outstanding, growing and profitable business units and the senior management team is now able to turn its attention in earnest to leveraging the business’s competencies and strong balance sheet to identifying and capitalising on meaningful growth opportunities.”